On Tuesday, Gold futures became more stable after a big drop of $60 in the previous session. The April 2024 contract reached a low point of $2,304.60 during the day but then went up to $2,335.57 by 5 PM EDT. Overall, it was a small decrease of just 0.23% in trading.
Monday’s sell-off in gold was caused by tensions in the Middle East easing after Israel’s strikes against Iran didn’t lead to more conflict. This made people less worried and reduced the demand for gold as a safe investment.
Now, everyone is focusing on the upcoming U.S. inflation report due on Friday. This report, called the Personal Consumption Expenditures (PCE) data, is important because it helps predict what the Federal Reserve might do next with interest rates.
Experts think the core PCE index, which excludes food and energy prices, will slightly decrease to 2.7% in March from 2.8% in February. However, the overall PCE index, including everything, is expected to increase to 2.6% from 2.5% the month before.
The Federal Reserve had planned to lower interest rates by three quarter-points by the end of 2023, but high inflation has made their predictions harder. They may need to rethink their plans, especially since they wanted to start cutting rates in June but haven’t yet.
For people investing in gold, what the Federal Reserve decides is really important. If they don’t cut rates as quickly as expected, it could slow down the rise in gold prices because higher interest rates make gold less attractive. But if they cut rates faster, gold prices could go up.
Until Friday’s inflation report comes out, uncertainty about inflation and the Federal Reserve’s response will continue to affect the gold market.
